Dominick Stephens, chief economist at Westpac, suggests that the Reserve Bank of New Zealand to cut the OCR in August and again in November, taking the OCR to an all-time low of 1%.

“And the risk to our new call is skewed towards earlier and/or more aggressive cuts – there is a possibility that the RBNZ could cut the OCR in September, and even a possibility that the OCR could drop below 1%. There is some risk the RBNZ could deliver the cuts more rapidly, in August and September, depending on how weak the labour market gets. The domestic economy has clearly slowed further than anticipated. Low business confidence is translating into slower hiring, and the forestry downturn could cause job losses. The recent rise in the exchange rate will also bother the RBNZ. If we are correct, retail fixed interest rates are going to fall even further. Lower mortgage rates will strengthen our call for a housing market upturn over the year ahead.”